At Cat, 2 sides consider next step

Union, firm mull how hard to fight

The United Auto Workers union and Caterpillar Inc. are back to square one.

A proposal that the giant Peoria-based manufacturer repeatedly described last week as its "last, best and final" offer was rejected Sunday by the union rank and file.

What's next?

A strike? A company-imposed contract? Long-stalled talks?

It all depends on how each side weighs the stakes of pushing the edges of an already acrimonious relationship.

At stake for the UAW is holding on to what remains of a badly tattered contract, the result of a 6 1/2-year dispute that ended in 1998 in an unprecedented defeat after more than 40 years of bargaining at Caterpillar.

Frustrated by nine months of contract talks that have not gone its way, the union could storm out of Caterpillar's plants, a strategy it once regularly employed.

Traditionally, blue-collar unions like the UAW counted on shutting down their workplaces as their ultimate bargaining weapon.

Caterpillar took that weapon out of the UAW's hands, however, by running its strike-bound factories with white-collar workers and temporary hires in the 1990s. It also leaned heavily on its overseas facilities to churn out tractors.

But the union also has to consider the fighting mood of its rank and file, a middle-aged workforce, of whom 70 percent will be able to retire within the next six years.

The contract wars of the last decade left a number of UAW workers disillusioned with their union and fretful for their future at Caterpillar.

Indeed, since 1998, the union has lost about 3,000 members at Caterpillar, falling to 9,200 members as a result of retirements, layoffs and the company's shifting work elsewhere. The UAW's ranks at Caterpillar today are one-fifth of what they were 25 years ago.

Mindful of the strong feelings among a workforce that included thousands who crossed their own picket lines, the UAW went into negotiations this time vowing to keep things cool.

Before the voting last week, for example, Gene Havelka, vice president of UAW Local 145 in Aurora, said workers were quite unhappy with the contract offer, and some were grumbling about the need to strike.

But most, he added, were hoping it wouldn't come to that.

Yet as devastating as the '90s were for its members, the UAW has seen Caterpillar budge lately only when the union threatens to strike, notes Victor Devinatz, a labor expert at Illinois State University.

"I don't see the company moving at all, if they don't fear a strike," he said.

Caterpillar's challenge today is deciding how far it wants to carry its fight to free itself from decades of union contracts, a fight it launched 12 years ago with the UAW.

Pointing to its position as the world's largest manufacturer of heavy equipment, the company said it could not compete globally while being lashed to contracts like those reached by the UAW with similarly sized U.S. manufacturers.

In 1998, the company was able for the first time to hire temporary workers at lower wages. It also swept aside the tradition of annual pay hikes.

This time, too, it is continuing the effort, seeking to limit workers' base wages. Under the company's latest proposal, workers would receive a signing bonus, cost-of-living increases and lump-sum payments.

More significantly, Caterpillar wants to create a new tier of wages and benefits for newly hired workers that would essentially wipe away some of the union's contract gains.

Traditional pensions would be replaced with a 401(k) plan, and most workers' pay would cap out at $14.34 an hour, $7 an hour less than what UAW members now receive for the same work.

Pressing an issue not just limited to global competitors, the company also wants the union's members and 20,000 retirees to begin picking up for the first time some of their health costs.

What made Caterpillar's battle to trim its labor costs unique a decade ago and now is that it is not a hard-pressed company.

It is a world competitor and a prosperous one.

"What we are looking at is what is right for us and our business, not what compares us to other manufacturers," explained company spokesman Ben Cordani.

As company officials declared last month, Caterpillar saw record profits and sales in the last quarter. And officials said they expect a 25 percent boost in sales and revenues for 2004, along with an "80 percent increase in profits" over last year.

With markets booming in most parts of the world in what company officials described in July as an "unprecedented" recovery for the company, Caterpillar executives have vowed to reap the fruits of the upturn.

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CATERPILLAR

Headquarters: Peoria

Founded: 1925

Current chairman and CEO: James W. Owens

Products: Construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Products and components are manufactured in 50 U.S. facilities and in 65 other locations in 23 countries around the world.

2003 sales and revenues: $22.76 billion, up from $20.15 billion in 2002